What to expect in 2023 in the U.S. housing market
The residential market in the United States represents an interesting niche in which to invest. Precisely for this reason, we decided to analyze it together with Opisas, a reality with more than 3,000 professional partners worldwide and 18 offices operating in 3 different continents.
It is an international group that operates with a focus on the United States by investing in residential properties with affordable values, rented to tenants with proven solvency.
Here are 3 questions for you to Boris Caharija Pizzolitto, CSIRO - Chief Strategic Investor Relations Office of Opisas.
How did the U.S. housing market close in 2022?
It concludes a two-sided 2022 for the U.S. residential market. In the first part, real estate values still rode the long wave of the previous year. In fact, in 2021 post lockdown from covid, there was a massive increase in demand for various reasons related to remote working, millennials entering the market, and interest rates at historic lows. This, coupled with extremely limited inventory, has led to a veritable price boom. In the latter part of 2022, however, in conjunction with the FED raising interest rates, rates on real estate mortgages soared. This quickly froze demand from so-called first home buyers (those who buy homes to live in). The market slowed very quickly and prices also began to retrace. The latest data speak of an overall +3.5 percent in prices in November 2022 compared to the previous year, with a peak in June of +18 percent and a low of -10.42 percent accrued between July and November 2022. The total number of transactions was also -35.4% in November 2022 compared to the previous year. (Source: National Association of REALTORS®)
Is there any news on the evictions front?
Eviction (executive eviction) processes have been stalled in several states and counties during the harshest periods of the pandemic and lockdowns. This happened quite unevenly across states. During 2022 these lockdowns were lifted. In some cases there were some delays in the administration of these procedures because the state administration had some difficulty in getting back up to speed. We must say, however, that even these issues are coming back, and eviction is returning to provide that peace of mind in protecting private property that is typical of the American system.
What is expected for 2023?
The dynamic that was determined in the latter part of 2022 continues. This creates a very interesting window of opportunity. Prices, in fact, continue to fall. In contrast, however, the rental dynamic is very strong as the average American who can no longer afford to buy a home due to high mortgage rates is forced to pour into the rental market. This reverse movement of prices and rents, increases the potential return on investment. The dollar is also retracing, another interesting element to evaluate.
On the other hand, as far as exit strategy is concerned, it should be kept in mind that a relevant unmet demand is forming within first home buyers. It is likely that this pent-up demand will spill over into the market as soon as mortgage rates begin to fall, i.e., FED rates stabilize or begin to fall. On the supply side, on the other hand, new construction is in great difficulty due to rising labor, material and financial costs. This is leading to a sharp reduction or even halt in new construction. Looking forward, therefore, any new increase in demand will again have to be met primarily by existing housing, which, as we have seen, is already insufficient. Should this scenario occur, a new appreciation of purchased properties is therefore likely, and thus rental yields can be associated with good capital gain opportunities over the medium term.
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